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Friday, 31 October 2014

RBS takes $640 million forex hit and warns more to come

State-backed Royal Bank of Scotland (RBS.L) has set aside 400 million pounds ($640 million) to cover potential fines for manipulating currency markets and warned further charges for past misconduct would continue to hit its profits.

RBS, 80 percent-owned by the British government following a 45 billion pound bailout during the financial crisis of 2007 to 2009, on Friday joined other big rivals in signaling it is close to agreeing settlements over alleged manipulation of the $5.3 trillion-a-day foreign exchange market.

Rival Barclays (BARC.L) said on Thursday it had set aside 500 million pounds to cover potential FX fines, while JP Morgan (JPM.N), UBS (UBSN.VX) and Citi (C.N) have also set aside large sums.

The forex manipulation, revealed after banks were already under scrutiny for profiteering in the setting of benchmark lending rates such as Libor, relates to daily fixing rates which traders are alleged to have manipulated to suit their own market positions.

RBS also faces a number of other probes relating to past misdeeds which threaten to undermine its turnaround under Chief Executive Ross McEwan, who has steered the bank back into profit this year after it made a loss of 8.2 billion pounds in 2013.

"We are actively managing down a slate of significant legacy issues. This includes significant conduct and litigation issues that will continue to hit our profits in the quarters ahead," McEwan told reporters on Friday.

RBS is being investigated by regulators looking into its selling of bonds backed by residential mortgages in the United States and its treatment of struggling small British firms. The bank is also expected to be fined by British financial regulators for an IT failure two years ago which left customers without access to their bank accounts.

In addition, RBS faces a mounting bill to compensate customers mis-sold loan insurance. It set aside another 100 million pounds to deal with the matter on Friday, taking its total bill to 3.3 billion pounds.